Setting Expectations for your Family Succession Plan
By Phillip “Dibbo” Dibben
“Five Steps for Succession Success is a collaboration between Kelly Kelly Legal and Financial Services SA”
When you are involved in a family farming business, there’s a lot at stake. Managing the day to day general demands of an intergenerational farm can mean it’s easy to lose focus on what needs to be addressed, making it hard to clarify what’s in the best interests of all stakeholders. In short, it can feel way too personal.
Setting expectations for the future is vital. Families who don’t plan well can unintentionally devalue their farming business as well as their family relationships.
“My son is about to get married and I know my future daughter-in-law worries that his “salary” from working on the farm will not be enough as they plan for their own family. We have an idea of what will happen to the farm in the future, but we don’t know how to do it all – as well as giving our son a “fair go,” we have to think about our retirement and also an inheritance for our kids who aren’t involved in the farm.”
Grains Research & Development Corporation, a division of the Federal Government, released a research paper which estimated that over 30% of all farmers have not discussed succession with their spouse. Over 50% have not spoken about succession with their farm-based children and 82% have not discussed it with their daughter-in-law. Further, more than 60% of second generation farmers have not spoken to their spouse about succession either. 
Farming practices, farming attitudes and the make-up of farming families have changed greatly over the last couple of decades and it’s becoming less likely for a farm to be automatically inherited by the eldest son. These changing family dynamics make it even more important to discuss the future of the farming business and legacy wishes.
Our recommendations for setting expectations for the future include:
1. Start talking ASAP: The earlier you start talking to your family about the future the better. In fact, we are seeing a trend that involves families commencing their succession planning process when their kids are teenagers. This is a welcome change – openly communicating with your family has many benefits as it greatly reduces uncertainty, incorrect assumptions and frustration about what the future may or may not hold. In our experience, when all children (even those not involved with the farm) have the opportunity to outline their expectations, they have a sense of ‘being heard’.
EXPECT to talk, listen, understand, explain and, at times, compromise.
2. Start from scratch: It can be difficult to differentiate between personal and business goals in a family business. Taking part in a structured business review that clarifies your current position while helping you to identify future goals, will allow all parties to plan more effectively for the future.
EXPECT to get down to ‘tin tacks’ and clarify what ALL family members want from the family business.
3. Get help: You can’t do this on your own – it’s complex, it takes time (often several years) and it’s too close to home. You need arms-length professional advisors who can empathise, but who will remain independent and prevent emotion from standing in the way of decision making that achieves appropriate outcomes.
EXPECT to assemble a team of professionals who can provide specialised financial planning, lending and legal counsel that will help you navigate the succession process.
The unfortunate truth is that poorly executed succession planning can damage family relationships and ultimately, the performance of your farming business.
Your overarching expectation should be to approach succession planning with your eyes wide open and importantly, with the central objective of achieving the best outcomes possible for your farming family.
At Financial Services SA, we have a personal interest in helping family farming businesses implement practical solutions to help them make the most of their personal and business situation. Dibbo has been helping primary producers and family business owners in rural and remote locations for more than 30 years.
If you would like more information about starting the succession planning process, I invite you to contact me today on 08 8253 2906 or email firstname.lastname@example.org.
Five Steps for Succession Success Articles
- Step 1: Setting Expectations Great expectations | A successful strategy for your family and your business
- Step 2: A Structured Approach Everyone at the table | We thought we were doing the right thing…
- Step 3: Identifying Everyone’s needs and concerns Walk a mile in their shoes | Planning a seamless transition from one generation to the next
- Step 4: Strategise What’s fair is not always equal | Horses for courses
- Step 5: Implementation Head in the sand about the future of your farming business?
Working in collaboration for a number of years, Financial Services SA and Kelly Kelly Legal offer insight and expertise in rural and family farming business succession planning. Accustomed to opening up meaningful discussions, we cut through technical-talk in favour of straight-talk, to offer integrated solutions that consider the often-complex nature of succession plans to incorporate business transition arrangements, wills and estate planning and retirement and superannuation planning.
The Kelly Kelly Legal team provide advice and representation across a broad range of legal areas including Deceased Estates, Employment Law, Family Law, Farming Leases, Liquor Licensing, Personal Injury Claims, Wills & Succession Planning, Commercial & Business Law, Conveyancing & Property Law and Criminal Law.
This advice is provided by Phillip Dibben under Financial Services SA rural business consulting services.
Phillip Dibben is an MFAA Approved Credit Adviser, including SMSF lending, and is an Authorised Credit Representative with Riverland Lending Services Pty Ltd, ABN 37 1415 814 080 ACL 391825, and is licensed to provide advice in all consumer and business loans including equipment finance. All loans are subject to lending and approval criteria.
Phillip Dibben is also a financial adviser at Active Financial Management. Active Financial Management and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.
This information does not consider your personal circumstances (including taxation) and is of a general nature only. You should not act on the information provided without first obtaining advice specific to your circumstances.